Oil: Supply disruptions in Kuwait and Nigeria – SocGen

Research Team at Societe Generale, suggests that the quick recovery in oil prices on Monday appears to have been caused by two new short-term bullish supply disruptions and the first new disruption is in Kuwait.

Key Quotes

“Over the weekend, crude output there was cut from a normal 2.8 Mb/d to 1.1 Mb/d, due to a labour strike. The loss of 1.7 Mb/d of sour crude supply is very significant. Refining operations have also been adversely affected. Based on the length of similar strikes against state companies in Norway and Brazil in recent years, our guess is that the disruption could last 1-2 weeks; Kuwait has said that they will use non-striking workers, presumably including engineers and managers, to minimize the outage, but the effectiveness of this remains to be seen.

The second new disruption is Nigeria, where last Friday, flows of 142 kb/d of light sweet Brass River crude were halted, due to a pipeline fire (no estimate for a return date yet). This comes on top of the ongoing 250 kb/d Forcados crude outage (expected to last another 8 weeks).

The Atlantic Basin was already expected to tighten in May, due to a combination of lower North Sea loading programs and seasonally higher European crude runs, as planned maintenance starts to wind down next month. This expected tightening is why ICE Brent M1-M2 timespreads flipped into backwardation in the past week. The Brass River outage, which brings the total disruption of Nigerian light sweet crude to almost 0.4 Mb/d, tightens the Atlantic Basin sweet crude balances a bit further.”